Kansas Utility Owes CEO $2.46M in Defense Costs

Echoing a similar holding by a federal judge concerning another company executive, a special master in Kansas state court has found that a utility company wrongly refused to pay $2.46 million in legal fees to defend its former chairman and CEO in a criminal fraud case.

The utility, Westar Energy Inc., says it plans to contest the finding, which now goes to a state-court judge for a determination, reports the Kansas City Star.

As is common concerning company executives, the utility had an indemnification provision in its articles of incorporation calling for Westar to pay “reasonably incurred” criminal defense costs, according to the newspaper. Westar contends that the costs in the case of former chairman and CEO David Wittig are unreasonable.

If the special master’s recommendation is upheld by Shawnee County District Judge David Bruns, this will be the second time that Westar has been ordered to pay for an executive’s defense costs in such a case. U.S. District Judge Julie Robinson decided in June that the company must now pay $3.2 million, representing half of the legal fees for former chief strategic officer Douglas Lake, but hasn’t yet decided about the other $3.2 million in legal fees.

Both men were indicted in 2003 on charges of looting Westar, the state’s biggest utility. In finding that the $2.46 million in defense costs for Wittig are reasonable, Jack Focht, a Wichita lawyer serving as special master, said the prosecution of Wittig is “one of the most novel, complex, intricate, white-collar criminal cases to be tried in the state of Kansas.”